1 Key trends that will shape future success in the beverage category January 2017 Ross Smith Consumer Insight Director
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Key trends that will shape future success in the beverage categoryJanuary 2017
Ross SmithConsumer Insight Director
Record of Product usage
Demographics
USAGE DIARY
INSIGHT QUESTIONNAIRE
Need States/Reasons for use
Location Purchased/Consumed
Lifestyle
Attitudes
Health & Wellness
A panel of 40,000 individuals, detailing their weekly beverageconsumption behavior…
3
In weekly consumption, the 8 core categories have lost substantial share of beverage occasions over the last 30 years
In 1987these traditional
categories were 95% of all beverage
occasions
In 2005these traditional
categories were 77% of all beverage
occasions
In 2016these traditional
categories are 71% of all beverage
occasions
In 1987Bottled Water was
1% of all beverage
occasions
In 2005Bottled Water was
16% of all beverage
occasions
In 2016Bottled Water is
21% of all beverage
occasions
. . .as Bottled Water has seen huge growth
% Occasions Excluding Tap Water Total US Consumers Ages 1+
12me Dec 1987-2014, June 2016
Hot Coffee Hot Tea CSDs Fruit Drinks Drink MixesIced Tea Milk Fruit Juice
4
Hot Tea+ 5.3M
More recently, categories that offer function or a blend of needs are seeing the most growth
GROWING CATEGORIES: 2011 VERSUS 2015+/- absolute drinkers
45%36%
% Change in DrinkersUS Consumers 1+
12me December 2011 vs 2015
NutritionalSupplements
+ 5.9M
% Growth in drinkers versus 2011
2015 Penetration
6%
58%
IcedCoffee+ 10.2M
9%
Smoothies
+ 11M
3%
13%6%
27%
12%
Specialty Coffee+ 8.7M
RTD IcedCoffee+ 4.1M
118%
2%
9%
Sports Drinks+ 2.7M
10%
5
DECLINING CATEGORIES: 2011 VERSUS 2015+/- absolute drinkers
2015 Penetration
% Decline in drinkers versus 2011
Diet/Mid Cal CSD- 7.2 M
-9%
22%
Dairy Milk
- 16.4M
-10%
47%
Fruit Drink-9.4M
-12%
22% 42%
Fruit Juice- 12M
-8%
PowderedDrink Mix
- 6.5 M
-19%
11%
The smaller, newer categories are taking away drinkers from the Staple Groups. Milk is losing more consumers than it is gaining
% Change in DrinkersUS Consumers 1+
12me December 2011 vs 2015
6
6 macro themes influencing beverage consumption
Hispanic growth
1 in 4 consumers by 2060
Centennials
The new millennial
Changing FamiliesEvolving family dynamics
“We want more”Functional future
“We want less”Conscious betterment
InvolvementOrigin, process and co-
creation
Population trends
Product trends
7
Hispanic Growth1 in 4 consumers by 2060
• Hispanics and Asians are growing ethnic groups that will be pivotal to Milk success moving forward. Both groups are consuming less Milk per capita and need to be regained into the category.
• These groups have a different set of tastes and needs, which as a category we need to continue to adapt to.
As a category, Milk needs to continue adaptation of its core product – a natural product but
also with strong taste credentials
8
79 77 76
12 13 13
11 11 13
5 6 5
2011 2013 2015
Asian
Acculturated Hispanic
African American
Caucasian
Milk Drinkers by Ethnicity% Drinkers (Multi-Select)
As they grow in size generally in the population, multi-cultural Drinkers are now accounting for higher share of Milk
% Milk DrinkersTotal US Consumers Ages 1+
12 me December 2011 vs 2015
9
474651445448
5854
CaucasianAfrican AmericanAcculturated HispanicAsian
Weekly Penetration - MilkUS Consumers Ages 1+
12 me December 2011 vs 2015
Weekly Milk Penetration by Ethnicity% Drinking Weekly
Acculturated Hispanics have seen stability in the market while others have declined, but all groups are consuming less Milk
Acculturated HispanicAfrican AmericanCaucasian Asian
24262130 3234
23
37
AsianAcculturated HispanicAfrican AmericanCaucasian
Weekly Ounce of Milk per Capita by EthnicityOunces per Capita
Acculturated HispanicAfrican AmericanCaucasian Asian
10
With a growing consumer group with different food tolerances, there is scope for more shelf
space for ‘free from’ products
We must adapt to changing population trends, and be ahead of the game with our offering for a
growing younger consumer group
Why does this matter?
*Films/Music/Games/Books Kantar Worldpanel 12me June 2016
31%of Acculturated Hispanics consumers are
age <20
They are a young consumer group, growing up with the ‘new norm’ of an extended/diverse beverage repertoire
With this growing Hispanic consumer group comes unique needs, behaviors and preferences
Hispanics are much more involved with Organic beverages, Natural beverages, and are more
likely to be Lactose intolerant
40%of Acculturated Hispanics
prefer to drinkOrganic beverages
vs 27% of total population
Acculturated Hispanic consumers are more likely
to be lactose intolerantIndex 133 vs total population
Hispanic beverage choices are flavorful, natural, and functional
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CentennialsThe new millennial
• As new generations come of age, we need to think about their (very) different consumption habits.
• This is a group that has grown up in different times – they want more from their drinks, and want to be communicated to in different ways.
• Younger consumers are moving away from Milk – we need to bring this back into the fore of their beverage consumption through more targeted communication around the benefits milk brings.
Target younger consumers with DIRECT messaging, demonstrating the ‘so what’ that Milk brings vs. the other drinks in
their expansive repertoire
12
82
4943
39 40
70
44
36 3640
U20 20-34 35-49 50-69 70+
2011 2015
% PenetrationTotal US Consumers Ages 1+
12 me December 2011 vs 2015
Although younger drinker penetration is vastly higher than the next closest age range , they are also leaving at the highest rate and are a risk. Older consumers are therefore becoming more important to the category
Ages20-34
Ages35-49
Ages50-69
Ages70+
Ages19 and Under
Weekly Dairy Milk Penetration in 2015 % Drinking in the average week
13
What kids and teens drink in the average week has changed dramatically compared to kids and teens born in previous generations
% Drinking in the average w eekTotal US Consumers Ages 17
12 me Decem ber 2006/ 12m e June 2016
2006
2016
Difference
84% 77% 77% 24% 2% 0%
66% 59% 58% 29% 7% 8%
8%
17%
-19 -18 -19 +6 +5 +8 +8
% of 17 year olds that drink the category in the average week
14*Films/Music/Games/Books
64% of consumers 13-19 use a smartphone to use social media
55% of consumers 13-19 use a smartphone to play games
Over 36million people ‘like’ Starbucks onFacebook
Kantar Worldpanel 12me June 2016Kantar Worldpanel ComTech 1m e June 2016
There are 7.4million public Instagramsposts with the hashtag #coffeetime
43% of consumers 13-19 agree that “My choice of drink brands is
important – I believe that what I buy says something about who I am”
(vs 30% of total consumers)
How we communicate with our consumers continues to evolve, and we must adapt with
evolving technology – do we have the ‘instagrammable’ factor for the centennial
consumer?
Why does this matter?
Centennials have grown up online! – an ‘on demand’ segment
42 45
7481
Total Consumers 16+ 16-19 year olds
2012
2016
% that own a smartphone
15
Changing FamiliesEvolving family dynamics
• We’re a nation of shifting households – we need to think about a different household dynamic with different decision makers and numbers of people.
• That said, the core for milk remains family mealtimes:
• Parents are willing to spend more on and try beverages that they perceive as Healthy. Messaging around Milk’s Health credentials will help gain popularity and trust with Parents.
• Milk ranks as the 3rd most consumed beverage at Family occasions! It outperforms other major beverages – play to the taste and meal accompaniment credentials of Milk at meals.
Milk is a major player within the Family occasion. Continue to focus on Breakfast
and especially Dinner, but use pack format to drive relevance to a new family
dynamic
16*Films/Music/Games/Books Kantar Worldpanel 12me June 2016
The age at which people settle down has increased significantly
Why does this matter?
As we see more retirees, and younger consumers settling down later, we see a shifting household dynamic
Median age at first marriage
Growth in living alone
53% of beverage occasions in the average week are consumed alone or with spouse
There has been a 6% increase in these smaller alone/spouse occasions since 2013
• Smaller multi-serve options for these households so beverages don’t ‘go bad’ in the refrigerator
• More shared refrigerators/cupboards – potentially one shelf in the refrigerator and limited space for large packs
• The influencers on purchasing decisions change drastically based on who you’re buying for - young adults have prolonged independent decision making
• In the future after this prolonged independence, what will they give their kids to drink? Family-time beverages may look very different in a few years time
17
3441
3833
16 14
5 76 51 1
Total Occasions Milk Occasions
Family No One I Was Alone Spouse/Partner Friends Work Colleagues Other
% Occasions Total US Consumers Ages 1+
12 m/e December 2015
…but let’s not forget that 4 out of 10 Milk occasions are consumed with Family! – a key opportunity to win multiple consumers at one occasion. Milk is also the 3rd most-consumed drink at Family Occasions
With Whom When Consumed% Occasions
18
11 4 8
1843
20
12
3
9
17
16
15
13 3
12
17 2225
13 9 12
Total Occasions Milk Occasions Family Occasions
When Consumed% Occasions
After Dinner
Dinner
Between Lunch & Dinner
Lunch
Between Breakfast & Lunch
Breakfast
Before Breakfast
% OccasionsUS Consumers Ages 1+
12 me December 2015
Mealtimes are key: Breakfast and Dinner Makeup Half of these Family occasions
19
“We want more”Functional future
• Across categories, consumers now expect more from their beverages beyond the core need-states.
• Consumers look now for beverages that help them concentrate, provide a healthier option, or keep them awake throughout the day. Beverages that provide a function are growing significantly in popularity.
• Consumers will pay more if a product provides a reason to do so – it is key to explicitly communicate the benefits your category provides.
Milk needs to explicitly communicate the benefits it provides over other beverages – do not assume consumers know about
the nutritional benefits Milk provides
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Functional beverage needs are growing…
As A Treat
Make a Healthier Choice
Help MeRelax
PurifyingClean
+13%+24%
+16%
+23%
% Growth in absolute weekly occasionsTotal Consumers Ages 1+12 me June 2016 vs 2011
Quick Energy +17%
Lasting Energy +13%
Easy to carry+32%
To Wakeme Up
+8%
Consumers are increasingly demanding beverages to provide energy and health benefits, however they still seek a treat!
10% of Occasions 9% of Occasions 6% of Occasions 6% of Occasions
5% of Occasions 4% of Occasions 3% of Occasions 2% of Occasions
21*Films/Music/Games/Books Kantar Worldpanel 12me June 2016Attitude statements apply to consumers age 13+
Consumers increasingly need to know what the beverage is doing FOR them
Beverages with protein as an attribute had 4.5 million more weekly
occasions in 2016 vs 2013! (+9%)
Consumers want more – but they will pay for it!
55% of consumers agree they will “pay more for beverages that fulfill my
needs”
With the growing needs for function in our beverages, in 2016 we have seen an influx of innovation in benefit beverages
Why does this matter?• It is more important than ever to
communicate beverage benefits
• We have seen the of rise of superfoods and ‘the kale effect’ – what’s the next big ‘super-beverage’ ingredient
• There is already a lot of activity in functional innovation – but is it becoming over-crowded? How do we continue to stand out with so many options?
• Do we need a stripped back ‘back to basics’ approach to providing benefits – the benefit comes from the purity
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“We want less”Conscious betterment
• While consumers want more function from the beverages they consume, they do need to know what is in the product – we need to be transparent in ingredients and health credentials.
• Health is no longer seen as ‘diet’, but ‘natural’ is – consumers want ‘back to basics’ products.
Be clear on the natural credentials of Milk – it’s purity, it’s basic composition and its wholesome nature as consumers move
away from less natural beverages
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˃ Health is no longer synonymous with diet – but ‘free from’ and ‘natural’ are
˃ Diets more focused around ‘back to basics’ - Paleo˃ Alternative sparkling beverages are in strong growth while
CSDs suffer – better for you flavored bubbles such as Sparkling Ice, La Croix
˃ Increased concern about ingredients comes with more ways to track what we are putting into our bodies
We are witnessing a more aware consumer, consciously trying to better themselves both in and beyond beverages, and seeking help to do so
14% of people age 16+ own a wearable
such as an Apple Watch or Fitbit
24*Films/Music/Games/BooksKantar Worldpanel 12me June 2016Attitude statements apply to consumers age 13+
2934
36 38 39
4547
2009 2010 2011 2012 2013 2014 2015
% PreferringAll Natural Beverages
KEEP IT REAL! Over time more consumers are seeking natural beverages
Consumers are actively aware of WHAT they are drinking, and are taking steps to exclude the artificial
Why does this matter?• Simple ingredients and communication around
beverage purity is paramount• Water continues to be a huge opportunity,
gaining share from other beverage categories• We need to bring more occasions back
from Tap Water, into packaged beverages
Bottled Water and Tap Water continue to gain share of beverage occasions, and innovation in Bottled Water has expanded into other categories
No longer simply a
consumer trend, but
government enforced
16.4 17.3
10.68.4
2005 2006 2007 2008 2010 2011 2012 2013 2014 2015
CoffeeWithSugarCoffeeWithArtificialSweetener
This preference for natural is seen in the way we drink our Coffee over time
25
InvolvementOrigin, process and co-creation
• Consumers want involvement and to know where their products are coming from – they are looking for a story, a location or a company they can trace their consumption back to.
• There is also the need for connection at a personal level – the ability to customize if needed, to control how they consume and find information themselves if they need it.
Tell the story of Milk and where it comes from – be clear on the origin and provenance of the category in a
transparent way
26*Films/Music/Games/BooksKantar Worldpanel 12me June 2016 vs 2015Attitude statements apply to consumers age 13+
Consumers are involved in their beverages, care about where their products come from, and want to be involved!
1 in 3 consumers make a genuine effort to support companies that give back to the local
community(5% more consumers than last year)
1 in 4 consumers say that they will frequently search online for information
about brands or companies(6% more consumers than last year)
45% of consumers prefer to purchase beverages that can be made
to their own taste preferences(6% more consumers than last year)
Why does this matter?• It’s no longer enough to provide a nice tasting
beverage that fulfills a need
• We need to think of news way to connect with and reassure our consumers, through involving them with the brand and values
We have seen an increase in Single Origin
products, and also products clearly stating the ‘made in’ label as a
selling point
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Consumers are increasingly engaged with the beverage making process. This was seen a couple of years ago with the boom of HPP Juices and one of the biggest successes of 2016 has been Cold Brew
Google searches in the US on ‘Cold Brew’ - evolution over timeIndex relative to highest point
We also see craft, provenance and DIY dynamics move from categories such as beer and wine into non-alcoholic beverages…
4 Points to Take Away
Milk needs to continue adaptation of its core product – a natural product but also with strong taste credentials
Continue to focus on the Family Mealtime, but use pack format to drive relevance to a new family dynamic
Innovation and communication should focus on Milk as a natural product, the origins of which are easily available
Target younger, Multi-Cultural consumers with DIRECT messaging, demonstrating the ‘so what’ that Milk brings vs. the other drinks in their
expansive repertoire
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